Here's Why We're Wary Of Buying YG-1's (KOSDAQ:019210) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that YG-1 Co., Ltd. (KOSDAQ:019210) is about to go ex-dividend in just three days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 17th of April.

YG-1's upcoming dividend is ₩120 a share, following on from the last 12 months, when the company distributed a total of ₩120 per share to shareholders. Calculating the last year's worth of payments shows that YG-1 has a trailing yield of 1.9% on the current share price of ₩6460. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether YG-1 can afford its dividend, and if the dividend could grow.

See our latest analysis for YG-1

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. YG-1's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If YG-1 didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 24% of its free cash flow as dividends last year, which is conservatively low.

Click here to see how much of its profit YG-1 paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. YG-1 was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. YG-1 has delivered 9.1% dividend growth per year on average over the past 10 years.

We update our analysis on YG-1 every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Is YG-1 an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: YG-1 has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that in mind though, if the poor dividend characteristics of YG-1 don't faze you, it's worth being mindful of the risks involved with this business. For instance, we've identified 4 warning signs for YG-1 (2 are concerning) you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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